MNC Community risk management strategies – From reactive risk management towards strategic community management
|Projekttitel||MNC Community risk management strategies – From reactive risk management towards strategic community management|
|Projekttype||Anvendt forskning og udvikling|
|Tema||Bæredygtighed | Business|
|Teaser||Can companies use their work with social responsibility to control business risk?|
|- Akademi||Zealand – Sjællands Erhvervsakademi|
|- Kontaktperson||Jacob Taarup-Esbensen
|Projektperiode||01. januar 2014 - 31. januar 2017|
When it comes to social risks, multinational companies (MNC) within Mining are one of the most exposed businesses one can imagine.
This project examines how social risk management is practiced through the case of Teghout copper-molybdenum mine in North-Eastern Armenia, supplemented with evidence from other mining MNCs in the country, onsite fieldwork, interviews with key stakeholders, and public available information.
Evidence suggest that a standards based social risk management strategy is adopted and that this strategy is based on international Corporate Social Responsibility (CSR) standards and philanthropic activities. However, evidence reveal that local and regional stakeholders, from whom social risk rise, feel disengaged from the process, continue to raise questions about transparency and in some cases actively oppose mining activities and that this is happening despite the use of stakeholder engagement management systems that is promoted through the standard. The implemented social risk management systems are ineffective because they makes the MNC unable to recognise the value of weak ties and fail to build legitimacy and trust with some of the key stakeholders resulting in the creation of more instead of less risk. It is argued that this is caused by MNC’s use of CSR systems focuses on building strong ties, rather than on building trust with the stakeholders that actually pose the biggest social risk.
|- Baggrund og formål||
A quick look at multinational companies (MNC) websites shows that they routinely communicate that they aren’t just in business to make a profit, but that their goals are equally focused on servicing the communities that they affect, for a broader and bigger social purpose (Vallex, 2014, Rusal, 2014, Geopromining, 2014). At the same time the very same companies are looking for compelling reasons why it make good business sense to engage in strategies looking for the connection between profit and ‘doing good’ (Schwartz & Carroll, 2003; Visser, 2010). This development has happened under the umbrella term Corporate Social Responsibility (CSR) promoting the idea that the actions of companies effects the societies that they operate in and the voices of these stakeholders should be included in the management decision making process (Carrol, 2004). One of the areas were business have found CSR useful is through the introduction into risk management and the argument that it enables companies to reduce social and environmental risks (Kytle & Ruggie, 2005; Vogel, 2008). An example of the use of CSR as Risk management can be witnessed in how MNCs within mining, that are present in Armenia, use standards to communicate with stakeholder groups. However, with globalisation and by that more easy access to information about company operations, it has become increasingly difficult to manage the number of stakeholders that could influence company operations. Research also supports that the principal reason why mining companies had to stop their operation is because they could not live up to the expectations of their local stakeholders (BSR, 2003). This paper is a continuation of this research investigating how mining MNCs in Armenia use CSR standards in an effort to manage social risk in order to building legitimacy with local stakeholders. The central case company used is the Cyprus based MNC Vallex group who operates the mining company Teghout CJSC supplemented with evidence from other mining MNCs operating in Armenia. Empirical evidence is gathered using public sources and a series of interviews with Armenian government officials, politicians, Non-Governmental Organisations (NGO) and local stakeholders who are directly affected by or is affecting mining operations. Research was conducted April to June 2014 and included a two-week field study to Armenian.
|- Aktiviteter og handling||
Based on approximately 6 months of field work in Armenia.
|- Projektets Metode||
The project will include both a philosophical and practical aspect. A review of existing literature related to Risk-, CSR- and international business studies will be conducted in order to further explore how international companies especially within the alternative energy sector have been held accountable in different ways. This will produce preliminary a framework for social risk analysis that can be tested in practice on companies currently active within the sector in Armenia.
|- Projektets Forventede Resultater||
A better understanding of the local population’s risk and how multinational companies manage this relationship with the communities that are directly affected by the company’s activities.
|- Projektets Forventede Effekt||
Savings over start-up and operation of major infrastructure projects and their implications.
|Tags||CSR | Social Risks|
|Partnere||CBS | Investeringsfonden | ZIBAT | Armenian Development Agency|
|- Ekstern||100% | Eksterne statslige kilder | Innovationsfonden|
When MNCs adopt a CSR standards approach they also commit to engage with the local, national and global stakeholders that have an interest or are affected by the actions and decisions that the company makes. This development has spurred a process of stakeholder engagement where mining MNCs in Armenia have adopted CSR standards and philanthropic initiatives. This isomorphic pull has originated from two directions, the institutional investors and from the Armenian government who have implemented a mining code and thereby the governance systems that the mining companies need to comply with.
|- Resultatets formidling||
Conference EIBA in Uppsala, 2015
|- Resultaternes værdi||
The development of research in this field
|- Målgruppen||Researchers in International Business, Risk management and CSR|
Peer rev. Artikel